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MIT Sloan Rotman Design Challenge: Target Retail Strategy
The document outlines Target's strategy to enhance retail experience by integrating local products, creating fun shopping environments, and providing seamless online and in-store interactions. It emphasizes the importance of engaging urban customers and leveraging local ties to build customer loyalty and foster community connections. Key recommendations include launching smaller urban stores, introducing local product lines, and enhancing the online shopping experience for increased customer satisfaction.
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MIT Sloan Rotman Design Challenge: Target Retail Strategy
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- 2. SEEING & TOUCHING PRODUCTS IS HERE TO STAY “I come in needing one specific item, then I end up shopping for more.”! 55% 30% In Store Online Shopping Preference The Converged Lifestyle, KPMG
- 3. RELEVANCE AND ACCESSDRIVE PURCHASE DECISIONS “I live in the area and love seeing if there are any good deals while I am walking by.” ! 33% 18% 2013 2012 Preference for Local PWC Retail Trends Report
- 4. SHOPPING SHOULD BEBOTH FUN AND PRODUCTIVE “I go to Target because I enjoy it while I get stuff done.” ! 65% 65% 50% 50% Lifestyle Lifestyle Everyday Everyday Planned Purchases Connected Consumer, Oracle Retail Connected Consumer, Oracle Retail
- 5. Problem Framing Field& Desk Research Concept Testing & Finalization Synthesis & Ideation
- 6. Moms Millenials Outliers Problem Framing Explore three customer groups Current core customers Future core customers Shoppers outside the norm
- 7. Field & Desk Research Target in-store intercepts Retail observations
- 8. Synthesis & Ideation In-depth interviews Locavore Target haterTarget lover Digital shopper Teen shopper New mom Mother of six In-store shopper
- 9. Synthesized research insights Generated dozens of ideas Clustered similar concepts Synthesis & Ideation
- 10. Concept Testing &Finalization Brainstorming a mock-up Market-testing the idea Rendering the concept
- 11. Target has anopportunity to lead a retail disruption Make It Fun Get Urban Be Seamless Design Principles Seeing & touching products is here to stay Relevance and access drive purchase decisions Shopping should be both fun and productive
- 12. What is it? Here comes the neighborhood Urban customers trust Target for everyday items and lifestyle products, but big box stores don’t make sense for their lifestyle or their location Get Urban
- 13. What did wehear? “It’s hard to find sheets in Brooklyn.” “I used to go in high school. It’s too far away now.” “I’ll stop in and shop for clothes and home stuff.”
- 15. Bright! by Target! Get affordable, design-focused lifestyle goods in smaller (20-40k sq. ft.) urban stores Stop in and pick up something for your apartment, the party you’re off to, or for your weekend away Get Urban
- 17. Target at Your Convenience! Get the Target brands you love and trust right near where you live and work Target now distributes affordable, high-quality everyday items through local, small-scale convenience stores Get Urban
- 18. What to testfirst? Consumer Desirability! Run focus groups and pop-ups of new concepts Financial Viability! Test product mix based on margins/desirability Project volumes by location Technical Feasibility! Build upon Target Express pilot Assess supply chain delivery Get Urban
- 19. What’s the impact? Rev/Sq. Ft.: $600 2x Target’s $300 – between Urban Outfitters and CVS Size: 30,000 Sq. Ft. About half the size of a City Target Total Rev per Store: $18.0 million 4-Wall EBITDA: 20% 10% Target Corp adjusted up for corporate G&A, etc. Earnings per Store: $3.6 million Leading lifestyle retailer for urban dwellers! 4-6 Bright by Target stores in every major " US metro area ! Up & Up is the ubiquitously available brand for affordable everyday items ! Significant penetration across local networks of stores in key markets Bright by Target: Store economics Get Urban Future Experience! Financial Considerations!
- 20. What is it? More fun at the all-in-one Large stores serve an important need for Target’s core demographic. But customers increasingly expect a more engaging shopping experience Make It Fun
- 21. What did wehear? “Local producers are awesome. I don’t want the same thing as everyone.” “It’s hard to pick when there are so many brands. I worry about being cheated.” “Big purchases are an investment. I want reviews and expert opinions.”
- 23. The Local Hub! Made Local, Made In America (or Canada). Spend your morning at Target checking out interesting local products that fit your lifestyle Target now offers new product lines incubated through the Target Saturday Marketplace Make It Fun
- 25. Up the in-store & bring in the online! Check out that new product you’re considering in our Product Petting Zoos Search and sort features and reviews right in the store Out of stock? Scan the tag and get it shipped for free Make It Fun
- 26. What to testfirst? Consumer Desirability! Pilot Target Saturday Marketplace in high-density suburbs Financial Viability! Assess Target Saturday Marketplace visitor volume Gather data from local merchants Technical Feasibility! Pilot successful Target Saturday Marketplace merchandise in regional stores Make It Fun
- 27. What’s the impact? Target as a creative hub for communities! Saturday Marketplace and local product sections at every suburban store, with local business growth spurred by incubation from the Saturday Marketplace. ! Leading in-store experience retailer! Increased frequency of store visits and larger average basket size Make It Fun Future Experience! Financial Considerations! Saturday Marketplace! Logistics coordinator Reduction in parking capacity Increased number of vendors to manage ! In-Store Experience! Technology development Reduced floor space
- 28. What is it? Seamless Shopping Customers are diversifying the ways they shop. Target brings the in-store fun online by creating a seamless, delightful shopping experience that offers customers transparency, immediacy, and personalization Be Seamless
- 29. What did wehear? “The website used to tell me if certain items were available... it doesn't now.” "There's no free shipping on the Target website. " “Too many things are out of stock too often.”
- 31. Shop the world! Take a photo of something you like and get suggestions for Target products that fit your style Target is redefining e-commerce as a leader in interactive content Be Seamless
- 33. TaskRabbit ! forTarget! Get same day delivery from your local Target Team up with an online community of individuals willing to make a Target run for you when you can’t Be Seamless
- 34. What to testfirst? Be Seamless Consumer Desirability! Test beta app in control group Build TaskRabbit network at sample store Financial Viability! Assess usage of beta app before full build Consider revenue share model with TaskRabbit Technical Feasibility! Analyze build vs. buy/partner strategy for delivery
- 35. Where will ittake us? Target brings its incredible in-store experience to the smartphone! Significant adoption by both core customers and millennials who use the app to drive increased online and in-store purchases; new channel for customer data and analytics Target-TaskRabbit network used as primary on-demand channel Last-mile delivery handled by distributed network of Target TaskRabbits Shop the World! Technology development ! TaskRabbit for Target! If Build: Need to establish two-sided market and monitor/manage requests added and fulfilled. Consider pre-signing interested parties before launching the platform If Buy/Partner: Would need to work with TaskRabbit to create functioning networks around Target locations Be Seamless Future Experience! Financial Considerations!
- 36. “I’m a littleobsessed with Target. I go there to de-stress. I just love it.” “The highlight of my life is going to Target.”
- 37. Disrupt retail GetUrban!Make It Fun!Be Seamless !
- 38. APPENDIX! 1) CustomerLifetime Value Segmentation 2) Customer Journey Map 3) Concept Deep Dive 4) Additional Concepts 5) Future Impact Detail
- 39. Our strategy is rooted in building loyalty to capture the full lifetime value of a customer as they move through different life stages. Recommended shopping experience Existing shopping experience LOYALTY CURVE: LIFE STAGES, LIFETIME VALUE Loyalty Curve: Life Stages, Lifetime Value Frequency of Trips OR Customer Spending Power Length of Relationship RedCard Users Teens College Young Adult, RedCard Users Young Family Empty Nesters Senior Citizens Active, Non-Loyal Active, Loyal Active, Loyal Active, Loyal Inactive, Loyal Ideal Curve Existing? Opportunity to intercept and establish loyalty, increase frequency of trips to Target, and increase share of wallet
- 40. Customer Journey Map Mood Look for items Browse Test items Compare prices, look for coupons, do research Purchase Enter Store Time Zero Moment of Truth Search and Sort Discovery Touchscreen Personalized Offers Inventory Track Product Petting Zoos Interactive, Immersive eCommerce Painless Checkout In Store Checkout Saturday Marketplace As Alice moves through the store, she is greeted with a seamless shopping experience. Recommended shopping experience Existing shopping experience
- 41. Why Urban? WhyTarget? I love Target because I can get food, clothes, shoes, bathroom items, everything there. And it's so bright and cheery inside!” Millenials have high lifetime value as customers Target is loved for affordable, stylish products Low-cost, private label brands are respected Huge opportunity in grocery space 1 of 3
- 42. Why does itmatter? Consumers are less satisfied and purchase less when they are overwhelmed by options.! ! Consumers do not shop at locations out of their way.! ! Consumers prefer to shop in curated, boutique environments.! 2 of 3
- 43. What has tobe true? Curation Location High-Volume Urban Areas Optimize Inventory Inventory Management Data collection + real-time crowd-sourced Experience Enhancement Focus on designing for see-feel-touch in-store New Revenue Source Beyond just opening a new store, Target can lead a category 3 of 3
- 44. Why Local? WhyTarget? Increase loyalty through local community tie-ins Capture all leads through on-demand order and shipping Gain trust through a more curated selection Stop showrooming with product petting zoos and free shipping “I wish Target had more local, organic and chemical free children's products besides Johnson Johnson.” 1 of 3
- 45. Why does itmatter? Consumers have a higher willingness to pay and preference for custom lifestyle products that are unique and local. ! ! Consumers get stressed when having to sort through too many products and make a decision. ! ! Consumers value reviews and research prior to purchasing big ticket items. Providing this on-site can reduce showrooming. ! 2 of 3
- 46. What has tobe true? Immersive Local High-Volume Surburban Areas Introduce New Products Differentiate, Boost Sales To relieve the tension between local versus mass purchases, give local options Experience Enhancement Bring out products for consumers to try and get shipped right away Act As An Incubator Source profitable new products with little risk and cost 3 of 3
- 47. Why Seamless? WhyTarget? Build loyalty by catering to customer expectations for immediacy Create delight by offering personalized discovery Gain trust through transparency and customer service online Build brand equity by becoming a content creator “I hate going onto a website and being bombarded. I return most stuff I buy online since I can’t tell if I’ll like it or not.” 1 of 3
- 48. Why does itmatter? Online is perceived as a resource the complements the in-store experience. ! ! Shipping costs is a deal breaker for shoppers who prefer the in-store experience.! ! Out of stock items can result in lost sales! 2 of 3
- 49. What has tobe true? Seamless Immediate Anytime, Anywhere New Technologies Curated, On Demand Provide personalized product recommendations and delivery through mobile Make Online Touchable Bring in-store online through immersive, interactive experiences Fuel Social Shopping Integrate with existing Target app to make shopping carts social 3 of 3
- 50. Additional Concepts Immersive e-Commerce! Interact with products, watch videos, and chat with experts. Target can redefine ecommerce by becoming a leader in interactive content and customer service
- 51. Additional Concepts FewerChoices, Easier Choices! Consumers get overwhelmed by too many choices and feel manipulated. Make shopping easier by offering high-quality store brands and cut down on selection for a curated experience
- 52. Future Impact: Wheredo these concepts take us? Where we’re starting What we propose Where we’ll go Target at your Convenience! Bright ! by Target! Small number of slightly scaled-down urban stores Leading lifestyle retailer for urban dwellers! 4-6 Bright by Target stores in every major US metro area ! Up Up is the ubiquitously available brand for affordable everyday items ! Significant penetration across local networks of stores in key markets
- 53. Future Impact: Wheredo these concepts take us? Where we’re starting What we propose Where we’ll go Up the in-store bring in the online! The! Continued growth of Local Hub! showrooming resulting in lower sales of research intensive purchases Risk of store visit experience becoming irrelevant and commodified Overwhelming selection of parity products competing with increasingly respected in-store brands Target as a creative hub for communities! Saturday Marketplace and local product sections within every suburban store ! Leading in-store experience retailer! Increased frequency of store visits and larger average basket size Fewer Choices,! Better Options!
- 54.